Icahn on CNBC: Herbalife ‘Very Undervalued’; Hurting Ackman is the ‘Strawberry on Top’

By Brendan Conway

Activist investor Carl Icahn was just on CNBC giving detail about his purchase of a 13% stake in Herbalife (HLF), the health-products company that’s battled pyramid-scheme accusations from hedge-fund manager Bill Ackman.

My colleague Tiernan Ray is watching and transcribing. From Tiernan just now:

Carl Icahn: I buy things that I think are undervalued. I think Herbalife is a very undervalued situation. We’ve done a hell of a lot of research on this, since Ackman has given me the opportunity by bashing it. We think Ackman’s, what I think is a scheme, is really unfair to people working at Herbalife. Ackman, sort of insults the FTC, tells them they’re not doing their job. My FTC attorney, who’s had 22 years experience, has stated the following: “Herbalife is a well-run legal, multilevel marketing company.” I listened to Ackman the other day at the conference, read his 300-page paper. We have not seen any expert opinion in that paper. What I thought was interesting about that conference is that Ackman said his law office, Sullivan [&] Cromwell, which we’ve never seen any evidence, is confident HLF is a pyramid scheme. I doubt that. I’m a betting man. They’ve never said that publicly. I challenge Ackman to bring out Sullivan Cromwell and have them say that this is a pyramid scheme.

Scott Wapner: So, what kind of work have you done on HerbaLife, because Ackman says he’s done 18 months of work?

I’d like to go into what Ackman has done here. When you look at this thing, you talk to experts. I’ve been doing this for decades, therefore I don’t think I have to defend what work I did. That’s not germane to the subject. Let’s just look what Ackman is saying. It’s nonsensical. First, I’d like to get back a little bit to Sullivan & Cromwell. The FTC has consumer protection and bureau of competition. This is important. Because it’s an arcane legal question, [the] question Ackman has brought up. You need a very good lawyer. When I hear from my FTC lawyer, that’s all he does is talk to the bureau of consumer protection at FTC, that’s what I want. But the lawyer that Ackman mentions, who fought Microsoft, that’s in a completely different area of the FTC from consumer protections. They’re not the FTC lawyer you would want here. But even so, I want to hear from that lawyer. I want to hear from the lawyer.

Wapner: Why is it such a great company[?] Because Ackman says it’s garbage.

Icahn: Okay, Herbalife is in the center of a secular change. The third world that’s building up and has a middle class does not have the retail system that you have in this country. HLF makes a product. It’s in the forefront of obesity, and nutrition. You have people who are out of work. Herbalife gives people an opportunity to make money and that is going to grow. The concept of selling in 87 countries is going to continue to grow, despite Ackman. And it’s what I think is a paradigm shift. The Internet makes it easier for people to get in touch with your friends, your neighbors, people you talk to. I see this as a growth thing. And you’re buying it very cheaply thanks to Ackman. Ackman has given me a great opportunity. This is my belief, this is an Ackman scheme. He’s done it before. Where you go in at the end of the year and you try and make a killing. Putting a 300-page paper together is nothing. You know, I’ve shorted stock, but the way you short stock is you keep it quiet. Because it’s very dangerous. But what is he doing? He goes in, he has this, I call it a scheme. What he does is he puts out a 300-page paper with drawings and all this crap, and he says this company is no good. And he says to the FTC, you better put these people out of work.

Icahn added further, when pressed by Wapner about whether he just wants to hurt Ackman:

Look, I’m in this to make money. That’s what I do. The fact that it might hurt Ackman, I’m not going to run and cry and do penance. You might like to say that it’s the strawberry on top for me, that’s up to you.

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